What is year-end tax settlement (연말정산) and how does it work?

The year‑end tax settlement (연말정산) is the employer’s final calculation of income tax on your wage‑salary earnings for the previous tax year, and the employer must issue the withholding tax receipt by the end of May of the following year; any extra tax over ₩100,000 can be collected in installments, while smaller amounts are deducted from the March wage 【1†L1-L4】【6†L1-L2】. Full details below.

Details

• What it is – The employer (withholding agent) reconciles tax actually withheld with the tax that should have been paid based on your total annual income and eligible deductions/credits 【1†L1-L3】.
• Timing – The final withholding‑tax receipt must be issued by the end of May for the prior taxable period 【1†L1-L4】【8†L4-L4】.
• How extra tax is handled
• If additional tax owed exceeds ₩100,000, the employer may collect it in installments when paying wages from March to May of the following year 【1†L6-L8】【6†L1-L2】.
• If the amount is ₩100,000 or less, it may be withheld from the March wage 【1†L9-L10】.
• Refunds – If you over‑paid, the employer must refund the excess by applying the same provision (Article 137‑2) 【1†L11-L12】.
• Employee duties – Provide accurate information on dependents, deductions, and any foreign income before the settlement period; review the issued receipt and request corrections if needed 【1†L19-L22】.
• Related statutes – Article 3 of the Income Tax Act (special cases for year‑end settlement) 【1†L13-L14】; Article 6 details procedures for the 2014 taxable period 【8†L1-L4】.
• Deadlines – Year‑end settlement must be completed by May 31 of the following year; a correction can be filed within three years 【2†L13-L15】.
• Help – For wage‑salary tax queries, call the National Tax Service at 1350; for legal advice, contact the Korea Legal Aid Corporation (132) 【1†L24-L25】.